Why the financial institutions are willing to offer

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Question - (a) Michael owns a company in the United States and it has a branch in London. He would like to expand his business by buying a new office in the United States, however, he does not have enough money and he does not want to sell stocks and bonds. He approached some banks in the United States and the interest rate is much higher than other countries. So which market that he should consider in getting cheaper funding? Explain how he can achieve this and why the financial institutions are willing to offer him a cheaper source of funding.

(b) The old CEO of Michael Bank resigned and a new CEO has joined. You are the advisor to this commercial bank. Your CEO would like to modify the capital structure by reducing the proportion of the shareholder equity. Explain to him what the pros and cons are for maintaining a small amount of shareholder equity.

Reference no: EM132971354

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